No individual liability for retaliation under the FCA
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Wednesday, July 19, 2017

No individual liability for retaliation under the FCA

By Robert B. Barnett Jr., J.D.

A medical billing clerk’s False Claim Act complaint against an ophthalmologist for retaliation was dismissed because the FCA provides liability only against the employer, not against the individual who owns the corporation, a federal district court in New York ruled. By enacting a 2009 FCA amendment which removed the phrase “discharged by an employer,” Congress did not intend to extend FCA liability to individuals for retaliation, the court held, rejecting other district courts’ holdings to the contrary as “outliers” (McKoy v. Uliss, July 13, 2017, Cogan, B.).

The medical billing clerk filed a qui tam suit under the FCA and the New York False Claims Act against her former employer and its owner, individually. She alleged that the owner trained her how to violate Medicare and Medicaid by submitting bills for reimbursement that were for services never performed, were exaggerated, or were unbundled when required to be bundled. She contended that the ophthalmologist falsified the records and then fired her when she refused to cooperate. When the United States and the state of New York refused to intervene, she amended her complaint by dropping the qui tam action and by substituting retaliation claims under both the FCA and the NYFCA.

Individual liability. The owner filed a motion to dismiss the claims against him individually on the ground that no individual liability exists for retaliation under either the federal or state statute. The plaintiff made two arguments why the owner should be held personally responsible. First, she argued that Congress intended to extend retaliation liability to individuals when it amended the FCA in 2009. Second, she argued that the owner qualified as an employer under the law. However, the owner was correct that no individual liability for retaliation exists under either Section 3730(h) of the FCA or under Section191 of the NYCFA. Both laws hold only employers liable for retaliation.

2009 amendment. In 2009, Congress amended the FCA to expand the retaliation provision to cover contractors and agents in addition to employees. When Congress amended the language, it removed the phrase “discharged by an employer” from the statute. The question for the court was whether Congress intended to extend liability to individuals when it removed the phrase.

Although district courts in Virginia and Connecticut have found that Congress intended to extend liability, this court called those decisions “outliers,” noting that many other district courts have rejected that argument. This court pointed to four reasons why it believed that Congress did not intend to extend liability: (1) the amendment’s primary purpose was to extend coverage to contractors and agents and there was no indication that Congress also intended to expand individual liability; (2) when the amendment was enacted, the courts had uniformly rejected individual liability, making it unlikely that Congress would change the law merely by negative implication; (3) Congress did not use phrasing commonly used in other anti-retaliation statutes to indicate individual liability; and (4) no changes were made to the remedies available for retaliation under the FCA. For all those reasons, the court rejected the argument that the 2009 amendment extended retaliation liability to individuals.

Owner as employer. “Employer,” under the FCA, has its ordinary meaning. The arguments that the billing clerk used to establish that the owner was the actual employer were appropriate for determining whether an independent contractor was an employee but irrelevant for determining whether an individual was an employer. The very purpose of forming a professional corporation is to avoid personal liability. Unless the billing clerk intended to pierce the corporate veil, which she did not allege, the owner was entitled to protection from individual liability.

As a result, the court granted the owner’s motion to dismiss him individually. The retaliation suit will continue only against his professional corporation.

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